§ Mrs. Virginia Bottomley
asked the Chancellor of the Exchequer if he will make a statement on the latest meeting of the European Economic Community Budget Council.
§ Mr. Brooke
Further to my answer of 25 July, at column461, the Budget Council reconvened in Brussels on 913W 8 to 9 September. As before, I served as chairman and my hon. Friend the Economic Secretary represented the United Kingdom.
The Council continued its discussions on the Commission's preliminary draft budget proposals for 1987. The Council also considered the Commission's preliminary draft amending budget for 1986 and amending letter for 1987.
The Council took note of the serious situation revealed by the Commission's communications whereby there is likely to be a revenue shortfall in the 1986 budget which could have serious implications for the resources available in 1987. The Commission undertook to provide later in 1986 more precise data on revenue and expenditure. The Council urged the Commission to take all possible measures to ensure that expenditure is reduced in an equitable way, while taking account of the Community's obligations and avoiding the slippage of expenditure to 1987.
The Council agreed by a qualified majority to establish a draft budget for 1987. The United Kingdom formed part of the qualified majority. Italy abstained. Portugal and Ireland voted against.
The draft budget respects the 1987 reference framework set by the ECOFIN Council in April, and is fully consistent with the budget discipline conclusions agreed by the Council in December 1984.
The expenditure proposed by the Council totals 35,946 million ecu (£22,552 million1) of payment appropriations and 36,945 million ecu (£23,179 million) of commitment appropriations. The Council proposed 22,961 milliom ecu (£14,406 million) of payment and commitment appropriations for agricultural guarantee expenditure; this is consistent with the 1987 budget discipline guideline for agricultural expenditure. It proposed 4,103 million ecu (about £2,574 million) in payment appropriations for other compulsory expenditure (somewhat below the limit in the 1987 reference framework). It also proposed 8,881 million ecu (£5,572 million) of payment appropriations and 9,855 million ecu (£6,183 million) of commitment appropriations for non-compulsory expenditure. These increases, which amount to 4.05 and 3.73 per cent. respectively, are within half the 1987 maximum rate of 8.1 per cent.
On the revenue side, the draft budget proposals imply that the highest rate of VAT paid by member states other than the United Kingdom and Germany would be 1.3445 per cent., while the United Kingdom's rate would be 0.7784 per cent. Provision is made for the United Kingdom to benefit from a VAT abatement of 1,633 million ecu (£1,025 million), in accordance with the abatement system agreed at the Fontainebleau European Council. The Council noted that revenue changes in 1986 would increase substantially the United Kingdom's share of VAT payments and thus our subsequent entitlement to abatement. The Council agreed that, to the extent that this abatement increase was not taken into account in the 1987 budget, the Council would include provision for it when establishing the 1988 draft budget.
The draft budget has now been forwarded to the European Parliament. The Parliament is expected to vote on its first reading of the budget in the week beginning 10 November.
1 All figures converted at the 1987 Budget exchange rate of £1 = 1.5939 ecus.